House of Reps clears NUPRC of N32bn revenue leak scandal, non-compliance with TSA

The Nigeria Upstream Petroleum Regulatory Commission (NUPRC) has said that it is a patriotic and transparent regulator and that no money is missing as reported.

The Commission Chief Executive, Engr. Gbenga Komolafe said this on Monday after the House of Representatives Committee on Public Accounts led by Honourable Salam Bamidele cleared the regulator of any wrongdoings regarding the 2021 Auditor General’s Report.

A section of the media claimed that the Public Account Committee uncovered N32,151,775,466.87 revenue leakages in the document submitted by NUPRC on revenue generated for the federal government from 2015 to 2022.

Reports had alleged further that the committee found that N909,392,169.74 had been transferred directly to private accounts in Deposit Money Banks without recourse to TSA protocols.

Also, there were allegations of discrepancies, including N15,476,269,397.10 in transactions listed in Remita and N6,332,212,384.25 in transactions from the NUPRC data set that did not appear in Remita.

To clarify the claims of missing N32bn, the Committee Chair, Bamidele said in his opening remarks that it did not accuse the NUPRC of misappropriation.

Bamidele said the committee is critical to protecting public interest, particularly revenue generation.

Bamidele said, “We are here because you elected us to do something very important for Nigerians and because this is a constitutional committee that sits like a court, we do not pronounce anyone guilty until after we exhaust every opportunity for defence on any matter before us. So, I want to place on record that it is not true that this committee has affirmed that there is a loss of N32bn in your organisation or agency. Certainly not.

“We don’t write for the media. We are not the reporters. I don’t know which medium reported it.

“Even the Auditor General, when he sent us his query, he said ‘possible loss’. So, it leaves it open to the Public Accounts Committee to decide. So, please be rest assured, we care so much about the integrity of the NUPRC. We do not want anything that can cause a disbalance.”

Presenting their case during the session, the Auditor General representatives at the hearing only raised concerns regarding revenues due from operators as of 2021.

Contrary to claims of missing funds, the Secretariat did not find faults or missing N32bn rather the issue was about royalties from producers.

He said, “The first issue is outstanding royalties due from operators. It was observed that $1.65bn was the outstanding royalty payable to the Nigeria National Petroleum Company to the Department of Petroleum Resources’ CBN account with respect to the production sharing contract, and repayment agreement as of 31st December 2021.

“Number two, the DPR received the sum of $1.41bn out of $1.65bn expected to be received thereby remaining an outstanding balance of $253.9m as outstanding royalty for the period under reference and the last, there was no reason provided for non-collection arrears.”

The Auditor General’s Office said the outstanding balance is $29.64m.

Explaining its position on the outstanding royalties, the NUPRC stated that production is an ongoing process. adding that NNPC Ltd has cleared the $29.64m outstanding royalties due as of the time of the material time addressed in the audit report.

NUPRC’s Executive Commissioner, Economic Regulation and Strategic Planning, Babajide Fashina, explained to the committee that, “Production is an ongoing thing and once people produce, they pay. Once we reconcile and discover there is a difference, we make efforts to recover. As we speak, there is no $29.64m outstanding payment by the NNPC.

“As at the moment, there is no shortfall at the material time. “

To clarify the position of the NUPRC on N32bn revenue leakage, The CCE, Engr. Komolafe explained to the committee that the commission has operated strictly to the provisions of the Petroleum Industry Act, 2021 in the discharge of its function.

Komolafe maintained that the NUPRC operates transparently in line with the framework that established the Federation Accounts.

The CCE said the alleged N32bn revenue leakage was a matter of understanding the framework of the Federation Revenue Accounting.

Komolafe told the committee that the framework is such that the commission is not in a position to tamper with the money.

For instance, he said that royalties are paid to accounts held with which flows to JP Morgan, adding that the commission is not a signatory to the account.

The NUPRC boss explained, “We are a patriotic and transparent regulator and the commission is committed to serving the nation effectively. We owe that duty to the nation in the sense that if you have a regulator that is not transparent, that regulator will send the wrong signal to the international community.

“There is no money missing from the commission. We don’t have anything to do with N32bn or any revenue. Our job is to help facilitate. The logic of the federation account is designed in such a way that the commission is only in the position to enforce remittance and not in the position to tamper with the money. That is the framework.”

Komolafe said the transparency shown by the commission is seen in the recent pledge by TotalEnergies Global Chief Executive Office, Patrick Pouyanne to raise investment in Nigeria, adding that it has submitted a bid for the ongoing bid round for oil block.

“This shows that we have restored investors’ confidence. He even said he would come back with the Ambassador of the country. This was the same CEO who went to Angola and said that investment should move out because of the regulatory environment,” the CCE said.

He emphasized that the NUPRC works relentlessly as a regulator, adding that its transparency has sent positive signals to International Oil Companies that predictability has been restored in the manner in which it regulates the industry.

Komolafe said the only thing the NUPRC gets in terms of funding in carrying out this responsibility is four per cent cost of collection and it is service service-specific fee.

“We are serving and helping the country to recover revenue in terms of royalty and it is just one aspect of our job and why it is important to situate that task in our statutory mandate is for checks and balances. It creates an unbroken chain of transparency for regulator to be responsible by helping the nation recover revenue,” he explained.

He said that the real conversation is on the outstanding royalties due from the operators and not regarding revenue leakage.

Responding to reasons why it has not taken certain measures against operators with outstanding royalties, Komolafe explained that the commission follows the dictates of the PIA in the enforcement of penalties.

The NUPRC boss said, “All we have done in terms of effort and why we have not as to helping to facilitate the remittances of royalties at the material time is because the law has a prescription as to when you can adjudge money as due. On our own as a regulator, we can’t amend the law.”

Komolafe said Nigeria’s oil and gas sector is guided by the PIA adding that the NUPRC has implemented all the relevant section of the PIA in the collection of fees due to the federal government.

He told the committee that as a regulator, “The most we can do is to apply maximum penalty which is the withdrawal of license, and if we do that, we will scare investors. We are in a situation whereby we are looking for investors in a challenging energy transition regime.

“We can regulate appropriately, moderately, or tightly which is over-regulation. If a regulator regulates tightly, it might kill the system. The capital expenditure of our nation has gone down and we are struggling as a regulator to revive that.”

Komolafe further explained that the energy transition is gaining momentum with an investment in renewables that has outstripped fossil fuel.

He said the projection for renewables in 2024 is $2tn while that of fossil fuel is $1tn.

“We have employed measures like engagement. We write reminder letters and if it becomes hard, then we do load and anchor. With load and anchor, they are forced to pay. Produce and load but we won’t allow you to go until you pay or we allow you to do a payment plan,” Komolafe said on measures employed to ensure revenues are remitted as at when due.

Following the clarification by the NUPRC, the Public Accounts Committee set up two sub-committees to reconcile its findings- one of the committees is headed by Hon. Jeremiah Umaru, Representative Akwanga/Nasarawa Eggon/ Wamba Federal Constituency.